While Optus has suspended the TV Now recording service in light of the adverse court ruling today, experts are divided on whether the ruling impacts cloud storage and recording services.

Optus TV Now allows customers to use Optus' storage cloud to schedule, record and playback free-to-air digital TV on 15 channels from a 3G mobile or PC. The full bench of the Federal Court upheld complaints made by the National Rugby League (NRL), the Australian Football League (AFL) and Telstra that the recordings of football broadcasts were not covered by time-shifting provisions in the Copyright Act, because it is Optus, or Optus and the customer jointly, that is making those recordings.

The time-shifting provisions of the Copyright Act, added by the government in 2004, state that a person is not in breach of the Act if they make "a cinematograph film or sound recording of a broadcast solely for private and domestic use by watching or listening to the material broadcast at a time more convenient than the time when the broadcast is made".

However, in its full judgment, the court said that this section of the Copyright Act was not intended to cover commercial copying on behalf of customers, such as that occurring in the Optus TV Now app.

The natural meaning of the section is that the person who makes the copy is the person whose purpose is to use it as prescribed by s 111(1). Optus may well be said to have copied programs so that others can use the recorded program for the purpose envisaged by s 111. Optus, though, makes no use itself of the copies, as it frankly concedes. It merely stores them for 30 days. And its purpose in providing its service — and, hence, in making copies of programs for subscribers — is to derive such market advantage in the digital TV industry as its commercial exploitation can provide. Optus cannot invoke the s 111 exception.

The court noted that the language in the Act is capable of excluding later technological developments for making recordings of TV broadcasts, but that this wasn't enough to clear Optus in this instance.

"No principle of technological neutrality can overcome what is the clear and limited legislative purpose of s 111. It is not for this court to re-draft this provision to secure an assumed legislative desire for such neutrality."

Optus has suspended its TV Now app for now.

"While we will be suspending the TV Now service at this time, we intend to keep leading the market with innovative and differentiated digital services," the telco said. "We will communicate the impact of today's decision to our customers accordingly."

Despite coming down so heavily against Optus, the judgment clearly pointed out that this ruling is specific to the way in which Optus and its customers interacted on the TV Now app.

"We accept that different relationships and differing technologies may well yield different conclusions to the 'who makes the copy' question."

Copyright Council executive director Fiona Phillips said that she doesn't believe the ruling will have an impact on cloud-based services that store copyright material.

"Here, Optus was seeking to rely on a 'private copyright' exception for its TV Now service. That is what the Federal Court said they could not do. The decision does not prevent commercial entities from offering cloud-based services; it just means they need to clear the rights before doing so," she said.

But Hamish Fraser, partner with Truman Hoyle Lawyers, questioned where the court would draw the line as companies move to offer more cloud-based services. He questioned how the relationship between Optus and the customer for the TV Now app is different to that of Sony selling a digital video recorder to the customer. He said that Optus has no stake in the individual recording that the customer makes.

"I'm not sure it's a commonly desired outcome that I record an episode of Dr Phil. Optus didn't want to record Dr Phil, it wanted to give me a service — a service I'm perfectly entitled to get from a hardware device," he said.

"It's the sliding scale, and I struggle with where do you draw the distinction? Where do you draw the line between a desktop one and a virtual one?" he said.

Fraser said that he is disappointed with the decision, and, depending on whether it is appealed, could see the digital video recorder being the only hardware device left in the home, with everything else being virtualised.

"From a public policy perspective, the decision is perhaps disappointing, in that at a time when the world is moving to virtualisation and cloud-based service offerings, and away from purpose-built hardware, we see the law engaged in an analysis of the technology itself, and not the outcome achieved," he said.

In a statement, Electronic Frontiers Australia (EFA) said that the judgment is a blow to consumers, and would have a "chilling effect on investment in cloud-based services".

"EFA believes that the Copyright Act should be amended to include a flexible right of fair use, to replace the narrowly defined and piecemeal exceptions that result in legal uncertainty and ensure that the law constrains innovation and restricts consumer choice. A flexible right of fair use is the basis for copyright law in the United States, and has helped to ensure its position at the forefront of technological and service innovation."

OzHub, a coalition made up of cloud providers like Macquarie Telecom, Fujitsu and VMware, said that today's decision will limit the use of cloud-based recording of free-to-air television.

"The migration of computing activities from individual devices into shared infrastructure in the 'cloud' is one of the most important trends of the past decade, and the Optus TV Now case represents a milestone moment," chairman Matt Healy said in a statement.

Healy said that the court's decision puts Australia's reputation as an innovation-friendly nation at risk.

Australian Digital Alliance chairman Derek Whitehead said that the decision creates "serious uncertainty for creators and providers of cloud-based services".

"The case clearly articulates the need for a flexible, open-ended exception in Australia to facilitate innovation in the digital environment. An open-ended exception may have provided the full Federal Court with greater flexibility in considering whether this new technology was lawful within the intentions of copyright legislation," he said.

For now, Optus is mulling over the decision, but has said that it will explore all options, including seeking leave to appeal the matter to the High Court.

Fraser said that the High Court may be interested to hear the case, since it has yet to examine the time-shifting provisions in the Copyright Act.

Updated at 3.29pm, 27 April 2012: added comment from OzHub and the Australian Digital Alliance.